MWA

We rate Mueller Water Products, Inc. (MWA) as a Buy with a composite score of 69.2/100 at a current price of $29.83. The stock scores above average across the majority of our six quantitative factors and ranks #116 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (87th percentile) and quality (85th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (44/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Mueller Water Products, Inc. holds a top-quartile position (#3 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 69.2/100 places it at rank #116 in our full 7,333-stock universe. At $4.0B in market capitalization, Mueller Water Products, Inc. is a mid-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -11% combined with momentum at the 57th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 36% (+12.5pp vs sector) narrow to operating margins of 18% (+10.6pp vs sector) and net margins of 13.3%, yielding a gross-to-net conversion rate of 37%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $29.83, Mueller Water Products, Inc. appears undervalued relative to its fundamentals. Our value factor score of 87/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 25.7x (a 35% premium to the sector median of 19.1x), EV/EBITDA of 18.9x (at a premium), P/B of 4.6x, P/S of 3.4x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to Mueller Water Products, Inc.. The stock presents a balanced risk profile: risk factors are within normal ranges. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

We identify no major risk factors at this time. The company's stability factor sits at the 84th percentile with quality at the 85th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: above-average stability (84th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Mueller Water Products, Inc.'s capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Mueller Water Products, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Mueller Water Products, Inc. receives a Buy rating with a composite score of 69.2/100 (rank #116 of 7,333). Our quantitative framework assigns a Narrow Moat (44/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 72/100.

Our analysis supports a constructive view on Mueller Water Products, Inc.. The combination of identifiable competitive advantages, medium uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.